Buyer’s guide to health cash plans

A health cash plan allows an individual to receive cash payments that cover the price of everyday healthcare costs. This kind of plan will primarily cover optical and dental care, as well as physiotherapy. However, health cash plans can also be tailored to include more varied benefits. They can be employee- or employer-funded as part of a corporate plan.

What are the origins of health cash plans?

First hitting the market in the 19th century, health cash plans were originally provided by charitable or non-profit organisations. Formed before the creation of the NHS in 1948, this system helped employees to pay for their various healthcare needs.

Where can employees get more information and advice?

More information can be found via the British Health Care Association, www.bhca.org.uk, which represents not-for-profit healthcare organisations, including most of the UK’s leading health cash plan providers.

What are the costs involved?

For employer-paid plans, the £1-a-week model is still predominant, although for the voluntary benefits market, contributions could fall anywhere between £5 and £10 a month. Adding bolt-on options to a basic plan will also increase costs, for example, Westfield Heath’s hospital treatment bolt-on sets the plan cost at £5.55 per employee, per month.

What are the tax issues?

Employer-paid health cash plans are treated as a benefit-in-kind for tax purposes and the value of the benefit is determined by the premium paid rather than the cash that is repaid to an employee.

What are the legal implications?

There are no legal implications associated with a cash plan, although an employer can use one to help fulfil its duty-of-care requirements to employees’ health and wellbeing.

What is the annual spend?

LaingBuisson’s Health cover UK market report, published in August 2015, found that total spending on health cash plans in the UK was estimated at £468m in 2014, with the average price paid quoted as £179. The average benefit paid equated to approximately £54 per claim during 2014, with £81m from employer-funded health cash plans and £387m from individually funded plans (comprising employee-paid schemes and personal cover).

Which providers have the biggest market share?

According to the LaingBuisson report, Simplyhealth has the largest slice of the health cash plan market, with an estimated income share of 43.5% in 2014. Westfield Health had 12% of the market in 2014, and BHSF Employee Benefits, Health Shield, HSF Health Plan and Medicash all have shares between 4.5% and 7%. Other providers in the market include Aviva, Benenden and Bupa.

Which providers have increased their market share the most?

A couple of key players have seen an increase in their market shares, with Westfield Health nudging up from 10% in 2006 to 12% in 2014. However, according to LaingBuisson Health Shield had the largest increase in market share, rising from 3.5% in 2008 to 6% in 2014.

Despite first emerging in the 19th century, the continued success of health cash plans has earmarked these as a well-used benefit, with its utilisation in the corporate sphere increasing in recent years. According to LaingBuisson’s Health cover UK market report, published in August 2015, there were 2,645,000 contributors to health cash plans at the end of 2014.

Available as either employee- or employer-paid, health cash plans allow individuals to claim back the expense of day-to-day medical treatments, with optical care, dental care and physiotherapy the mainstays of health cash plan benefits. Whether treatments are provided by the NHS or privately, health cash plans are a low-cost and affordable option for employers when looking to support the health and wellbeing of their staff and fulfil their duty of care.

They also have an element of flexibility because employers can choose what products to include or exclude for their employees’ plan. As well as leading to general improvements in the health of an organisation’s workforce, health cash plans can contribute towards reduced sickness rates, especially because employees can get a lot of healthcare cover for a minimum cost.

Although typically costing £1 per week per employee, industry trends show that creating a more comprehensive health cash plan package is on the agenda for many employers. According to Westfield Health, employers are now opting for higher levels of cover as products have become more established. For example, Westfield Health’s offering includes a non-urgent, elective hospital treatment bolt-on.

Another way that health cash plans are being bolstered is by adding complementary medicine to the roster of services available; LaingBuisson’s report lists aromatherapy, herbalism, nutrition, Indian head massage and sports massage as a few of the newer treatments making an appearance. Despite this influx, optical treatments still make up the bulk of health cash plan claims at 30.6% of the total benefit, while dental treatments account for 27.6%. Physiotherapy comes in third at 19.7%.

Market growth

The health cash plan market is experiencing continued growth. Westfield Health has demonstrated between 5% and 10% growth in voluntary sales over the last few years, citing the everyday benefits health cash plans provide as a point of attraction to employees, while employers value it as an engagement tool. Meanwhile, BHSF Employee Benefits has achieved a 24% increase in new business from 2015. BHSF Employee Benefits sees approximately more than one claim per policy holder per year, while Westfield Health sees roughly two claims per policy holder per year.

LaingBuisson’s report found that employer-funded health cash plans took 31.5% of the market share in 2014, compared with 8% back in 2006. Although individual policies have seen a downwards trend, with sales hitting the 7%-8% mark in the four years to 2014, employer-paid plans are going from strength to strength with a 36.5% new business rate.

In addition to serving as a cost-effective way of supporting employee health, health cash plans can also run alongside other corporate health schemes, such as private medical insurance (PMI).

With ancillary benefits such as 24/7 GP access, prescriptions and employee assistance programmes (EAP) now being added to health cash plans, these are widening to support the diverse needs of organisations and workforces.

Statistics:

5.7% of the UK population was covered by a health cash plan at the end of 2014 (Source: LaingBuisson, Health cover UK market report 2015)